Interest in the Canadian dollar likely to be 'scarce' today; USD forecasted to improve performance against CAD

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Published on Friday, 03 August 2012 12:17

Written by Will Peters

International Money Transfers at our sister site

"Following along our broader FX forecast shifts, we slightly increase our USD-CAD forecasts" - Bank of America.

The Canadian dollar (Currency:CAD) will find it difficult to attract attention today with no Canadian jobs data and a long weekend ahead for the domestic market.

The pound to Canadian dollar exchange rate is 0.21 pct in the red at 1.5600.

The US dollar to Canadian dollar exchange rate is 0.44 pct lower on a daily basis at 1.0027.


"To a large extent, the CAD continues to trade in the shadow of the big dollar. USD/CAD is stuck in a tight range and USD moves against its G-10 peers is reflected in the CAD’s performance on the crosses (EUR/CAD reaching a new EUR-lifetime low, printing a shade below 1.22 yesterday during the broader market volatility around the ECB press conference).  That is liable to continue unless or until the CAD can find a way to differentiate itself, for the better or worse, from the USD," says Shaun Osborne at TD Securities. 

Over at Bank of America Merrill Lynch Global Research analysts have advised that they are looking for a slightly softer CAD than before.

Commenting on the Canadian dollar's outlook, BofA say:

"Following along our broader FX forecast shifts, we slightly increase our USD-CAD forecasts. We continue to look for a softening of the CAD to 1.04 in Q3, but now look for 1.05 for year-end (1.03 previously) as we grow increasingly worried about a risk-negative/USD-positive reaction to the oncoming US fiscal cliff.

"Fundamentally we remain skeptical about the outlook for European sovereign debt, which impacts CAD broadly through damaging risk sentiment.

"However, the upside for USD-CAD should still be more limited amid USD-negative QE3 from the Federal Reserve, which we expect in September. For the longer term we retain some optimism for the CAD, maintaining our 2013 year-end target of 1.01; our time path to the end of next year reflects a gradual return to normalisation, similar to our EUR-USD forecast profile. Note, however, we did not change our AUD or NZD forecasts."